Is a Mortgage Lender Better Than a Bank?

There is no shortage of decisions to be made when you begin your homebuying journey, but one of the first and most important is where to source your home loan.

There is an ongoing debate about mortgage lenders versus banks; specifically, how do you decide which option is better? Although both these financial institutions offer mortgages, a few factors give mortgage lenders an edge over traditional banks.

Mortgage Lenders vs. Banks: Is There a Difference?

The most fundamental difference between a mortgage lender and a bank is the scope of the services they provide.

Your local bank may offer mortgages, but its primary business function is providing financial services, including savings and checking accounts, certificates of deposit (CDs), credit cards, and personal loans.

Mortgage lenders exclusively provide financing for homes, land, and other real estate purchases.

Even if you only focus on the mortgage lending side of a bank so you’re comparing apples to apples, mortgage lenders often come out ahead in terms of:

• Interest rates and fees
• Loan products
• Eligibility requirements
• Programs and incentives
• Processing times

Let’s take a closer look at what that means for homebuyers.

The Benefits of Working with a Mortgage Lender Instead of a Bank

Navigating the complexities of buying a home can be overwhelming, so it’s important to work with professionals who can offer you the most support during your buying journey. 

Here are a few ways that obtaining a home loan through a mortgage lender rather than a bank can save you time, effort, and money. 

Specialization and Focus

One of the biggest benefits of selecting a mortgage lender over a bank is that you will work with a mortgage expert who knows the ins and outs of the industry.

This specialization enables mortgage lenders to offer special loan programs, such as down payment assistance, interest-only loans, and programs for first-time homeowners.

A mortgage lender may also have the resources to create custom financing solutions that aren’t available with a traditional bank mortgage.

Loan Options and Flexibility

There is no such thing as a one-size-fits-all mortgage. Many mortgage lenders are better positioned than traditional banks to offer a variety of mortgage products, including conventional loans, Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, United States Department of Agriculture (USDA) loans, and jumbo loans.

Mortgage lenders also have fewer regulatory constraints and more flexible underwriting criteria, which can help borrowers with non-traditional financial situations or credit challenges get a mortgage. You may also be able to negotiate better rates and terms with a mortgage lender. 

Because mortgage lenders have more streamlined underwriting and approvals, they can often expedite turnarounds and accelerate the time to closing.

Service and Communication

Working with a mortgage lender broadens your loan options and enhances the level of personalized service and communication you receive. 

Mortgage lenders build a reputation (and a client base) on their responsiveness and customer service. Typically, you will work directly with a representative who provides one-on-one guidance from application through closing, giving you a single point of contact who understands your financial situation and goals.

Working with a single mortgage lender makes communication more efficient and response times shorter, which is critical if you are house hunting in a highly competitive real estate market.

Final Verdict: Is a Mortgage Lender Better Than a Bank?

If you prioritize specialized mortgage products, competitive rates, and a streamlined homebuying journey, working with a mortgage lender versus a bank is your best option.

But we completely understand if you need more information before you decide. As the direct-to-consumer mortgage lending division of First Federal Bank, FFB Mortgage Lenders is uniquely positioned to offer the best of both worlds. Our team is here to answer all your questions about types of mortgages, interest rates, credit scores, closing costs, down payments, and any other home loan-related topics.

Click below and someone from our team will be in touch soon!